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Just two weeks ago, private equity powerhouse Kohlberg Kravis Roberts & Co got a hefty return on East Resources, a natural gas exploration and development operator. The company sold out to Royal Dutch Shell (RDS) for $4.7 billion. KKR had invested $350 million in East Resources about a year ago. The estimated take on the transaction: $1.5 billion.

Flush with success from that deal, KKR has announced that it will invest up to $400 million in a joint venture with Houston-based Hilcorp Energy, another natural gas producer. The goal of the deal is to develop the Eagle Ford Share in South Texas. In the deal, KKR will get a 40% equity interest and Hilcorp will contribute 100,000 acres of land.
"Three Guys and a Telephone"

Hilcorp began operations in 1989 as a raw start-up: "three guys and a telephone." But the three guys happened to be experienced oil veterans with a keen sense for running a business.

Using sophisticated technologies to locate fields, Hilcorp would eventually turn into the fourth-largest private oil and gas company in the U.S. Its tough acquisitions' strategy became known as "acquire and exploit."

While the company's current valuation is fuzzy, the co-founder and CEO, Jeffrey Hildebrand, has an estimated $2 billion net worth, according to Forbes. In fact, he bought out one of his partners, Thomas Hook, for $500 million in 2003.

Given the complexities of shale fields, the injection of capital from KKR will certainly be helpful to Hilcorp in developing the Eagle Ford Share -- especially as the credit markets continue to be tough. Of course, Hilcorp will leverage its long experience in successful development in the region. All in all, it looks like a good partnership.

And it should be lucrative as well -- the Eagle Ford area is estimated to have over 80 billion barrels equivalent of oil. Also, it is strategically located next to key pipelines.

KKR has a good record with energy plays. In fact, the firm has been structuring such deals since the mid 1980s, beginning with its Texas Petroleum transaction. And given the intense interest in natural gas shale, KKR should be nicely positioned for profit on its latest deal with Hilcorp.